Funder due diligence: what gets checked before a grant is approved

Ask an NGO why it lost a grant and you will usually hear something about the proposal. Ask the funder and you will often hear something quite different: the organisation could not evidence how it manages money. Due diligence is a separate gate from technical review, it is usually pass/fail, and no amount of programme quality compensates for failing it.

The good news is that it is the most fixable part of the whole process. Unlike a proposal, which is written against one call, due diligence readiness is built once and then works for every application you make.

1. Legal and registration

• Certificate of registration or incorporation, and your governing document.
• Tax status and, where applicable, the registration that permits you to receive foreign contributions — in India, a valid FCRA registration, which many international funders treat as a hard prerequisite.
• Proof the organisation is in good standing: annual filings up to date, registration not lapsed.
• A current board or trustee list, with any conflicts of interest declared.

A lapsed filing is the most avoidable failure on this list, and the one that most often surfaces at the worst moment.

2. Financial management — the part that decides it

Funders are assessing whether money can safely pass through you, be spent as agreed, and be accounted for afterwards. Expect them to ask for:

• Audited accounts, usually for the last two or three years, signed by an external auditor.
• Your annual turnover, because most funders will not award a grant larger than a certain multiple of it. This is why a small NGO cannot jump straight to a very large grant, however good the idea.
• Segregation of duties — that the person who approves a payment is not the person who makes it. In a small team this is the hardest to demonstrate and the most frequently queried.
• A written finance manual: procurement thresholds, authorisation limits, petty cash rules, asset register.
• Bank account in the organisation’s name, with the ability to track restricted funds separately.

3. Safeguarding, ethics and compliance policies

For most international funders these are now mandatory, and a policy that exists only as a document is not enough — they will ask who is trained on it and who is responsible.

• Safeguarding of children and vulnerable adults, with a named focal point.
• Protection from sexual exploitation, abuse and harassment (PSEAH).
• Anti-fraud, anti-bribery and whistleblowing.
• Anti-terrorism financing and sanctions screening of partners and suppliers.
• Data protection, particularly if you hold beneficiary data.
• Code of conduct, and increasingly an environmental or do-no-harm policy.

4. Delivery and governance evidence

• Prior grants of comparable size, with donor references who will answer an email.
• Evidence you have reported against a logframe before, in a funder’s format.
• Board minutes showing genuine oversight — funders do look for a board that meets.
• An organogram and CVs for the key staff you name in the budget.

5. Why smaller organisations lose here — and what to do

Nothing on the lists above requires a large organisation. It requires an organised one. The gap is almost always administrative rather than programmatic, and it is closable in a few months of unglamorous work:

1. Build a due-diligence folder now, before the next call. Registration, last three audits, all policies, board list, organogram, key CVs, bank letter. Keep it current and dated. Most deadline panic is spent assembling documents that could have existed already.
2. Get audited even if you are not required to. It is the single highest-return expense for an organisation trying to move up in grant size.
3. Adopt the policies properly. Board-approved, dated, with a named responsible person and a record that staff were briefed. Downloaded templates with another organisation’s name in the footer are noticed.
4. Fix segregation of duties on paper where headcount will not allow it in practice — a documented second approver, even a board member, answers the question.
5. Start at a realistic grant size and build a reference trail. Funders check what you have delivered, not what you could.
6. Consider partnering first. Delivering as a sub-grantee to an established organisation builds exactly the evidence base you are missing — see how NGOs win development contracts.

6. When due diligence happens

Some funders screen before review, some only for shortlisted applicants, and some run it in parallel with contracting. Assume it can be triggered at any point after you submit, and that you may be given a short window to respond. An organisation with the folder ready answers in a day; one without it misses the window and loses a grant it had already won on merit.

Browse open grants and funding opportunities, or read how to write a grant proposal for the review stage that comes before this one.